Land and Buildings Transaction Tax – What is the Land and Buildings Transaction Tax (LBTT)?
Land and Buildings Transaction Tax, often abbreviated to LBTT, is a type of tax paid on the lease or purchase of property in Scotland.
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LBTT applies to both land and buildings, and covers both residential and commercial properties. The rate depends on the total value of the property, as well as whether the purchase is for residential or commercial use.
If you are liable for LBTT, you must complete a tax return with Revenue Scotland. You can do this online or via post.
Land and Buildings Transaction Tax and residential property
LBTT is charged on residential properties valued at £145,000 or more. The rate you pay depends on how much the property is worth overall and is determined by the following bands:
- Up to £145,000: 0%
- £145,000 to £250,000: 2%
- £250,000 to £325,000: 5%
- £325,000 to £750,000: 10%
- Over £750,000: 12%
For example, you purchase a new home worth £400,000. You pay nothing on the first £145,000, 2% on the next £105,000 (£2,100), 5% on the next £75,000 (£3,750), and 10% on the remaining £75,000 ( £7,500). You would pay a total of £13,350 in Land and Buildings Transaction Tax.
First-time buyer relief
LBTT includes a relief for first-time buyers, which is designed to make it easier for people to buy their first home. First-time buyers have a higher tax-free threshold of £175,000. This means that LBTT is only charged on properties valued at £175,000 or more, and the 2% tax band covers the portion of a purchase between £175,000 to £250,000.
Additional Dwelling Supplement
If you are purchasing an additional residential property, you will be affected by the LBTT Additional Dwelling Supplement (ADS). The ADS is charged at 3% of the total purchase price of any additional home valued at £40,000 or more.
Land and Buildings Transaction Tax and commercial property
LBTT is charged on commercial properties valued over £150,000. LBTT is charged on commercial property using the following bands:
- Up to £150,000: 0%
- £150,000 to £350,000: 3%
- Over £350,000: 4.5%
For example, you purchase a new office space worth worth £400,000. You pay nothing on the first £150,000, 3% on the next £200,000 (£6,000), and 4.5% on the remaining £50,000 (£2,250). You would pay a total of £8,250 in Land and Buildings Transaction Tax.
LBTT may also be charged on commercial leases above £150,000 at a rate of 1%. If LBTT is due on a leased property, a tax return must be submitted every three years, as well as at the end of the lease.
Taxes on property across the UK
Until 2015, Stamp Duty Land Tax applied throughout the UK. On April 1st 2015, LBTT came into force in Scotland to replace Stamp Duty. Wales also has its own tax on land and property, Land Transaction Tax, which replaced Stamp Duty in April 2018. Stamp Duty Land Tax still applies in England and Northern Ireland. All three taxes follow simillar principles, but the specific rates, bands, and thresholds of each tax varies.
Land and Buildings Transaction Tax and Debitoor
Land and buildings are important company assets that fall under the category of PP&E. With Debitoor invoicing software, it's easy to keep track of your company assets.
When you create a new expense, you have the option of marking it as an asset. You can then choose which category the asset falls under, and apply depreciation if necessary.
